Top ERP predictions for 2011

Some aspects of the ERP (enterprise resource planning) software landscape, such as tired legacy code-bases and disastrous implementation projects, may never go away. But in recent years, the pace of change with ERP has accelerated, and there all signs are that will continue in 2011.

Here's a look at some of the likely outcomes for ERP next year, based on conversations with industry analysts, recent market data and a bit of gazing into the crystal ball.

ERP gets serious in the cloud

While ERP vendors have been making moves toward cloud computing for some years now, the situation will get serious in 2011 as customers demand that option, according to Frank Scavo, managing principal of the IT strategy firm Strativa.

"As cloud-based solutions for CRM, HR, and other functional areas gain market share, many ERP prospects will ask why they can't have their entire ERP suite in the cloud," he said via e-mail recently.

Some vendors are already trying to provide the cloud experience, simply by porting their software to public cloud services like Amazon's Elastic Compute Cloud or selling them via subscription, he said.

"But the real action will be with vendors that have built or re-engineered their products from the ground up to take full advantage of the capabilities of cloud-based computing, such as multi-tenancy and low-impact revision upgrades," he added. "As the economic recovery improves new deal flow, vendors who do not move beyond hosting will find themselves increasingly out of consideration."

And an Amazon-like option simply isn't enough, according to Forrester Research analyst Paul Hamerman. "Customers want a complete service offering that bundles vendor maintenance, application managed services, upgrades, hosting, and usage fees. Look for enterprise application vendors, and their services partner ecosystems, to deliver more comprehensive ERP deployment options," he said via e-mail.

The "game-changing technologies" for cloud-based ERP are PaaS (platform as a service) as well as BPM (business process management), which allow the extension and customization of cloud software, Hamerman added.

SAP admitted that its former TomorrowNow subsidiary made illegal downloads of Oracle software in the course of providing cut-rate support for Oracle customers. Oracle is also suing Rimini Street, another third-party support provider.

Third-party maintenance will "slow or go underground as litigation plays out," Hamerman said. But the rising cost of support will nonetheless prompt customers to consider alternatives, he added.

In lieu of that, vendors like SAP have an opportunity to "completely reinvent the game of ERP support" given the BI and analytics tools at their disposal, said Jon Reed, an independent analyst who closely tracks SAP. Such a system could charge customers based on the burden they place on SAP, rather than impose a flat percentage on all customers, regardless of need, Reed said.

Admittedly, this may be too visionary, since like all software vendors, SAP is heavily dependent on maintenance revenue.

Either way, SAP and other ERP vendors should prepare for customers to start looking for ways to reduce their maintenance spending, said Ray Wang, CEO and principal analyst of Constellation Research. They'll do this by getting rid of shelfware, canceling licenses and other means, he said.

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